GMO’s asset allocation team has observed that the recent rebound in US stocks is presenting investors with potential shorting opportunities. Since hitting their lows in April, US stocks have surged by approximately 27 per cent through the end of July. This rally, according to GMO, has been fuelled by aggressive buying from retail investors, particularly in more speculative sectors of the market.
The fund noted significant gains in specific areas. Unprofitable technology companies, meme stocks, and stocks sensitive to Bitcoin prices have experienced surges ranging from 55 per cent to as high as 115 per cent in just 15 weeks. GMO suggests that this robust momentum has driven valuations and speculative activity to potentially risky levels, with signs pointing towards exuberance in certain market segments. GMO is a global investment manager that provides investment solutions to institutions, family offices, and financial intermediaries around the world.
The hedge fund identified several groups of stocks that have seen substantial rallies since April’s lows. Bitcoin-sensitive stocks have risen by 112 per cent, while the ARK Innovation ETF has increased by 86 per cent. Quantum-related stocks have climbed by 84 per cent, meme stocks by 77 per cent, artificial intelligence stocks by 60 per cent, and unprofitable technology stocks by 57 per cent.
